Ecccon exam prep
A monopolist produces in the elastic segment of its demand curve because when it lowers the price
A monopolist produces in the elastic segment of its demand curve because when it lowers the price
A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for the product will be
A.
Which of the following is NOT a characteristic of perfect competition?
There are substantial barriers to entry into the industry.
Which of the following statements regarding the relationship between average and marginal costs is INCORRECT?
There is no way for average variable costs to fall when marginal costs are falling.
In the short run, which of the following is FALSE about the shutdown point?
Total revenue is equal to total fixed cost
Refer to the above figure. Which of the following statements is TRUE?
Under perfect competition price equals marginal cost (P3) while under monopoly price (P4) is greater than marginal cost (P1)
If the long-run supply curve slopes downward, we know that this is
a decreasing-cost industry.
A decreasing-cost industry will have
a downward sloping supply curve in the long run.
When the marginal cost curve of the monopolist shifts upward, there will be
an increase in price but a decrease in quantity.
In a perfectly competitive market, positive economic profits act to
attract new entrants into the industry.
As a firm continues to produce additional output, which of the following will continue to decline as output expands?
average fixed costs
Suppose there are fixed costs and marginal costs that are constant. Then we know that
average total costs decrease continuously as output increases, and lie above the average variable cost curve, which is constant.
Which of the following is a characteristic of a monopoly firm?
barriers to entry
In order for a firm to receive monopoly profits, there must be
barriers to market entry.
The law of diminishing marginal product shows the relationship
between inputs and outputs for a firm in the short run
For a perfect competitor, price equals
both average revenue and marginal revenue.
The firm's short-run costs contain
both variable and fixed costs.
Utility analysis is the analysis of
consumer decision making based on utility maximization
If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it should
continue to produce this amount if it wants to maximize profits.
As long as price exceeds AVC, the firm is better off
continuing production.
The profit maximizing behavior of a monopoly is different from that of a perfectly competitive firm in that a monopoly can
control the desired price and output to maximize profits, but a perfectly competitive firm can only choose the desired output.
Successive downward movements along the demand curve for the product of a monopolist always generate successive
decreases in the additional per-unit revenues earned by the monopolist
Which of the following is NOT one of the reasons a firm might be expected to experience economies of scale?
depreciation
All of the following are reasons for economies of scale EXCEPT
diminishing marginal product.
A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $3, and MR = $4. We can conclude that
economic profit could be increased by producing more
Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT
economies of scale
In the above figure, for any output level less than Q2, this firm experiences
economies of scale.
Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT
economies of scale.
Total revenues
equal the price per unit times the total quantity sold.
When demand is perfectly elastic, marginal revenue is
equal to price
When demand is perfectly elastic, marginal revenue is
equal to price.
Economic profits at the short-run break-even point are
equal to zero.
A monopolist finds the price-output combination that maximizes its profits by
equating marginal revenue and marginal cost
Which of the following is a short-run decision for a firm?
firing workers
Using the above table, if the price of Pepsi is $3, how many cans of Pepsi would have to be consumed in order to have a marginal utility to price ratio of 3?
four cans
A constant-cost industry
has a horizontal long-run supply curve.
In the short run, average total cost is
higher than average variable cost
A monopolist charges a price that is ________ and produces ________ than a perfect competitor.
higher; less
The market demand curve in perfect competition is found by
horizontally summing the demand curves of the individual consumers.
Dr. Rodriguez is consuming beer and wine. At his current level of consumption, the marginal utility per dollar is 30 units for beer and 15 units for wine. Dr. Rodriguez should
increase his consumption of beer relative to wine.
The price elasticity of demand for a monopolist
increases as similar products enter the market.
As the quantity of labor increases while the amount of other inputs are held constant, marginal product of labor will
initially increase and then decrease.
A firm that must determine the price-output combination that maximizes profit because it faces a downward-sloped demand curve
is a price searcher.
The marginal revenue curve of a perfectly competitive firm
is also the demand curve faced by the firm
The owner of a perfectly competitive firm is currently earning an economic profit of zero. This owner
is covering all of his fixed costs.
When a firm is operating at an output rate at which total revenue equal total costs, this is called
its breakeven point.
A perfectly competitive industry's market price is found by
locating the intersection of the market demand and market supply curves.
Ajax Corporation has recently finished building a new factory. They moved into the factory a month ago and found that it is the perfect size given the amount they want to produce. Ajax is operating in the
long run.
If a farmer seeks to buy one-hundred more acres for her kiwi fruit farm, she is making a
long-run decision.
The opportunity cost to society of producing one more unit of the good is
marginal cost
The change in total product occurring when a variable input is increased and all other inputs are held constant is
marginal product.
A firm seeking to maximize economic profits should produce at the output at which
marginal revenue equals marginal cost.
In order for a consumer to choose between two different goods, he has to take into consideration the
marginal utility divided by the price
The market structure in which there is a single supplier of a good or service for which there is no close substitute is
monopoly.
Consumers usually buy fewer units of a good than the quantity that would maximize total utility from consuming the good because
they have limited incomes
Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a higher long-run price, we know that
this is a decreasing-cost industry
A situation in which the price charged is greater than society's opportunity cost would lead to
too little being produced.
The long run for a business is a period of time
when all inputs can change.
Refer to the above figure. Profits will equal zero
when the price equals $2.
If the above figure accurately portrays the market conditions for a given monopolist, we can be assured that the monopolist
will be forced to go out of business in the long run
If markets are perfectly competitive, then the production of goods
will use the least costly combination of resources.
Use the above figure. The profit-maximizing output will be
Q3.
Average variable cost equals
TVC/Q
Which of the following statements is NOT true for a perfectly competitive firm?
The firm can influence its demand curve by advertising its product.
A monopolist will earn economic profits when
ATC lies below the demand curve
When considering marginal revenue for the monopolist, which of the following is FALSE?
The more the monopolist wants to sell, the higher the price it has to charge in order to make more profits.
To induce an increase in the quantity demanded of its product, a monopolist must reduce the
price of its product and thereby generate a rightward movement along its demand curve
The relationship Q = f(K, L) is an example of a
production function.
The marginal product of labor is calculated assuming other factor inputs
remain constant
Economists criticize monopolies because monopolies
restrict output and raise prices compared to a competitive situation
Which of the following would best describe the demand curve faced by a monopoly firm?
same as the market demand curve
Price discrimination is the
selling of a given product at more than one price when the price difference is unrelated to cost differences
For most goods, the real-income effect of a price change is
small because the good accounts for a small part of the consumer's budget.
The substitution effect refers to
substitution of less expensive commodities for more expensive commodities.
Marginal revenue equals
the change in total revenue from selling one more unit
Marginal utility is defined as
the change in total utility divided by the change in number of units consumed.
According to the substitution effect, if the price of a product goes down
the consumer will buy more of the good at the lower price than at a higher price, creating a downward sloping demand curve.
All of the following are true about a monopolist EXCEPT
the demand curve for its product is perfectly elastic.
A perfectly competitive industry's market or "going" price is established by
the forces of supply and demand.
If a monopolist produces to a point at which marginal revenue is less than marginal cost then
the incremental cost of producing the last unit exceeds the incremental revenue.
The demand curve for a monopolist is
the industry demand curve.
Under perfect competition, the demand curve facing the firm is determined by
the intersection of the industry demand and supply curves
Which of the following is closest to a perfectly competitive market?
the market for broccoli
Conclusions about the misallocation of resources under conditions of monopoly depend, in part, on the crucial assumption that
the monopolization of a perfectly competitive industry does not change the cost structure of the industry.
The rate of production at which marginal revenue equals marginal cost is
the point where profits are maximized.
The time period during which a firm's capital is fixed but its labor is variable is called
the short run
In the short run, total costs equal
the sum of total fixed costs and total variable costs.
Utility refers to
the want-satisfying power of a good or service.
Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence that
there is a competitive market in energy distribution in the United States
Monopolies that price discriminate do so because
they can increase their profits.
Suppose that a firm is currently producing 500 units of output. At this level of output, AVC is $1 per unit, and TFC is $500. What is the firm's TC?
$1,000
In the above table, total fixed costs are
$10.00
Refer to the above table. At an output of 3 units, average variable costs are
$14.
A perfectly competitive firm faces a market clearing price of $150 per unit. Average variable costs are at the minimum value of $200 per unit at an output rate of 100 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is
0 units, because price is less than average variable costs.
In the above figure, the total cost of producing the profit maximizing level of output is shown by rectangle
0P2BQ1.
Refer to the above table. When the quantity of labor equals 4, what does the average product equal?
18
Refer to the above table. What does the marginal product equal when the quantity of labor goes from 1 to 2?
26
Refer to the above table. The marginal utility of the 6th movie for Michelle is
30 units of utility.
Marginal physical product of the first worker is 100, 120 for the second, 80 for the third, 30 for the fourth, 5 for the fifth, 3 for the sixth, 2 for the seventh, 1 for the eighth, and 0 for the ninth. What is total product for the fifth worker and the ninth worker respectively?
335; 341
The price of product A is $3, the price of product B is $2, and you have $18 to spend. What combination of product A and product B will give you the most satisfaction?
4 units of product A and 3 units of product B
In the above table, the marginal product of the 3rd worker is
5.
Refer to the above table. What does the marginal product equal when the quantity of labor goes from 3 to 4?
9
In the above figure, if the firm is facing demand curve d2, then to maximize profits it will produce at output level
B.
The profit-maximizing price and quantity established by the unregulated monopolist in the above figure are
Q1 units of output and a price of P1.
If Frank has been consuming 5 hamburgers per week at a consumer optimum, and the price of hamburgers falls, how will Frank respond?
He will buy more burgers
Which of the following statements with respect to the figure below is INCORRECT?
If the permanent rate of output increases to Q2 in panel (a), it will be more profitable to have a plant size corresponding to SAC3.
Which of the following is NOT a characteristic of a perfectly competitive market?
It is difficult for a firm to enter or leave the market.
Which one of the following statements is FALSE?
MC = TC divided by Q
Which of the following is NOT true for a perfectly competitive firm?
MR = TR
In the above figure, the firm experiences constant returns to scale between output levels of
Q2 and Q3
Which of the following statements is TRUE?
Monopolists raise the price and restrict production, compared to a competitive situation.
In the short run, a firm should shut down when
P < AVC
Which of the following is always TRUE in the short run for a perfectly competitive firm that is maximizing economic profits?
P = d = MR = MC
Economic inefficiency of a monopoly is indicated by
P > MC.
Refer to the above figures. Which panel best represents marginal utility?
Panel C
The law of diminishing marginal product is responsible for
none of the long-run relationships
The concept of the production function implies that a firm using resources inefficiently will
obtain less output than the theoretical production function shows
Drug companies protect their monopolies over various drugs they develop by utilizing
patent protection.
When total product is increasing at an increasing rate, marginal product is
positive and increasing.
Economies of scale can
prevent the entry of new firms into a market
Monopolies misallocate resources because
price does not equal marginal cost.